Hayne & Co Ltd v Central Agency for Co-Operative Societies (In Liquidation)

• Jurisdiction: South Africa
• Court: Appellate Division
• Judge: Stratford CJ, De Villiers JA, De Wet JA and Feetham AJA
• Judgment Date: 12 April 1938
• Citation: 1938 AD 352

Feetham, A.J.A.:

The plaintiff company, which carries on business as a grain merchant and exporter, sued the Liquidator of the Central Agency for Co-operative Societies Ltd, (hereinafter referred to as "the Agency") for an order requiring him to accept for proof and to rank for dividend in the liquidation of the Agency certain claims of the plaintiff for damages alleged to have been caused by the Agency's breach of contract in failing to deliver maize under which it had sold under certain forward contracts. It was agreed that the question of liability alone should be decided in the first instance; the quantum of damages in the event of the plaintiff succeeding was to be dealt with subsequently. The forward contracts referred to in the first claim in the declaration, and also the joint venture agreement in issue in the other two claims, which resulted in the making of other forward contracts purporting to bind the Agency, were entered into on behalf of the Agency by its general manager. The pleas to all three claims attacked the authority of the general manager to enter into such contracts on the ground that he had no mandate express or implied. Alternatively it was contended that if he had a mandate such mandate was ultra vires of the memorandum of association of the Agency.

The Transvaal Provincial Division held (1) that the general manager had a mandate to enter into the contracts, but (2) that the mandate was ultra vires of the memorandum of association. This appeal is against the decision on the second point.

The Agency was originally registered in 1910, as a limited company under the Transvaal Companies Act 1909, and was subsequently registered in terms of sec. 57 of Act No. 28 of 1922 (the Co-operative Societies Act, 1922) as a central co-operative company with limited liability under sec. 35 of the Act. Under sub-sec of sec. 35 membership in a company of this type is confined to:

(a)

co-operative agricultural societies, co-operative agricultural companies and central co-operative agricultural companies registered under the Act.

(b)

any company registered in Swaziland, Southern Rhodesia, Northern Rhodesia, the Bechuanaland Protectorate and South West Africa, approved by the Minister.

The grounds of the defence raised, that the contracts in question were ultra vires, were stated as follows in paragraph 5 of the plea:

"(a)

In terms of the said Memorandum the Agency had power to enter into contracts for the sale of maize only if and when the

Feetham, A.J.A.

maize, the subject-matter of the sale, had been delivered to or placed at the disposal of the Agency. The Agency had no power in terms of the said memorandum or under any contract or law to enter into any contracts for the sale of a larger quantity of maize than had been delivered to it or placed at its disposal.

"(b)

Each and every contract mentioned in paragraph 3 of the Declaration was a contract for the sale of maize which the parties contemplated would be received by the Agency at some future date from its members, or from members of its members, for disposal.

"(c)

On each and all of the respective dates on which the said contracts were entered into no such maize had been delivered to or placed at the disposal of the Agency."

The allegations contained in sub-paragraph (b) and (c) are not contested in the care of any of the contracts in question: the question for decision in this appeal is the question as to the powers of the Agency raised in subparagraph (a).

The terms of the memorandum and articles of association of the Central Agency were considered in Lewis & Co. (Pty.) Ltd. v Pietersburg Ko-operatieve Boere Vereeniging and Others (1936 AD 344. In that case action was brought against certain cooperative societies, which were constituent members of the Agency, for breach of contracts to supply maize, of an exactly similar type to the contracts here in question, alleged to have been entered into by the Agency on behalf of such societies, the allegation being that in entering into the contracts the Agency had acted as the agent express or implied of the defendant societies, and that, therefore, the defendant societies, as undisclosed principals, were jointly liable for the loss sustained by the plaintiff in the non-performance of the contracts. It was held that the Agency had neither express nor implied authority to bind the defendant societies by selling forward on their account maize of which it had no legal possession.

For the purpose of the decision in Lewis' case the Court found it necessary, to examine the objects of the Agency as set out in clause 3 of the memorandum, which consists of a number of subclauses (a) to (w), and also the articles of association of the Agency. The sub-clause of the memorandum, the effect of which was more especially considered, was clause 3 (b), which reads as follows: "Om ten behoeve van de leden der Maatachappy, die Ko-operatieve

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Landbouw Verenigingen zullen zyn, de landbouprodukten te ontvangen en te verkopen, die door zodanige leden voor date doeleinde opgezonden zyn, of door leden van de leden dezer Maatschappy, die landbouwprodukten direkt aan de Maatschappy ter verkoop zenden op rekening van hun verenigingen en om kontrakten aan to gaan voor het uitvoeren van zulke produkten of het vervoeren daarvan."

The following translation of this clause was, as appears from the judgment of TINDALL, J., accepted as correct in the Court a quo: - "To receive and sell for the benefit of (ten behoeve van) the members of the company, who shall be Co-operative Agricultural Societies, the agricultural products which have been sent by such members for that purpose or by the members of the members of this company who may forward such agricultural products to the company direct for sale on account of (op rekening van) their societies and to enter into contracts for the export of such produce or for the transport thereof."

An alternative translation suggested of "ten behoeve van" was "on behalf of." Calisch's Nederlands-English Dictionary translates this expression as meaning "for the profit of" or "in behalf of," it seems clear that, though the expression may be translated "in behalf of," or "on behalf of," it does not necessarily import the notion of agency.

It should he noted that in the preceding sub-clause 3 (a) the word namens is used in the sense of "on behalf of," where contracts binding the Agency entered into on its behalf by certain William Pyott are referred to: the use of the more general expression "ten behoeve van" in 3 (b) is significant as indicating that 3 was not intended to cover only Agency transactions.

Article 86, which has to be considered in conjunction with clause 3 (b), binds every member of the Agency to deliver to the Agency at such places as the directors may prescribe all produce which it cannot sell for

"local use," and provides that any produce so delivered may be pooled and sold, or otherwise disposed of, together with and as forming part or parts of any other such produce; it also provides that the Agency may receive produce direct from individuals who are members of societies which are members of £6 Agency, but that receipt of such produce is to be considered as a receipt of produce from the society of which the individual concerned is a member, and such produce is to be treated and accounted for as if it were forwarded by the societies themselves; and the

Feetham, A.J.A.

Article concludes with the words "and the sales dealing therewith (i.e., with produce forwarded by individuals shall be subject to the same regulations, responsibilities and risks as those affecting sales for members, as prescribed in these articles."

WESSELS, C.J., in dealing with clause 3 (b) of the memorandum In his judgment in Lewis' case, said (at p. 356):

"The articles of the Central Agency set out what this body can do and inter alia its duty is to receive agricultural produce (in the present case maize) and to sell such produce as is sent to it for the purpose of sale either by the societies which constitute its members or by farmer members of such societies on behalf of the latter (Art. 3 (b) ).

"Now I am not prepared to say that this article must be so narrowly interpreted as to mean that the Central Agency can only sell such maize as it has in its stores. I think the article must be reasonably interpreted to apply to...